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Tech stocks extend post-Fed rally, Dow futures lag

U.S. stocks were mixed on Thursday, highlighted by a vault upward in tech stocks after the Federal Reserve’s latest rate hike and ahead of another batch of earnings from the tech industry’s biggest players.

The tech-heavy Nasdaq Composite (^IXIC) rose nearly 3% in midday trading. The S&P 500 (^GSPC) rose 1.3%, while the Dow Jones Industrial Average (^DJI) lagged, falling 0.4%.

The yield on the benchmark 10-year US Treasury bond ticked down to 3.358% on Thursday morning. The dollar index rose 0.12% to $101.33

The major US stock averages closed higher on Wednesday after the Federal Reserve̵[ads1]7;s much-anticipated interest rate hike to 25 basis points, representing another slowdown in its inflation-fighting campaign. Chairman Jerome Powell’s upbeat comments on the state of inflation moved markets higher.

The Fed’s decision follows recent economic data showing more evidence of easing inflation in recent months, although Powell stressed that the Fed’s campaign is far from over.

Tech stocks extend post-Fed rally, Dow futures lag

WASHINGTON, DC – FEBRUARY 1: Federal Reserve Chairman Jerome Powell speaks during a press conference following a meeting of the Federal Open Market Committee on February 1, 2023 in Washington, DC. The Federal Reserve announced a 0.25 percentage point increase in interest rates to a range of 4.50% to 4.75%. (Photo by Kevin Dietsch/Getty Images)

The macro picture was mixed on Wednesday, with ISM’s latest manufacturing PMI falling and missing consensus expectations. Meanwhile, private payrolls added 106,000 jobs in January, down from the 170,000 expected by economists.

The next big event on the macroeconomic front is Friday’s January jobs report, which will be critical for investors to assess whether there is evidence of an easing labor market.

December’s jobs report showed that the labor market remains strong, as employers added a robust 233,000 jobs for the month and an average monthly increase of 375,000 over last year.

The number of Americans filing new jobless claims fell to 183,000 for the week ended Jan. 28, the Labor Department said Thursday, down from the 195,000 expected by economists.

On the earnings front, Meta Platforms ( META ) reported fourth-quarter results after the clock that topped revenue expectations, while delivering a $5 billion cost cut. It also announced a $40 billion share buyback. Shares of the social media giant rose more than 23% in midday trading on Thursday morning.

The S&P 500’s top-weighted components — Amazon ( AMZN ), Apple ( AAPL ), Alphabet ( GOOG ) — are preparing to report quarterly results on Thursday after hours. All were up at least 3% in early trading.

Merck & Co. (MRK) delivered better-than-expected earnings in the fourth quarter, but predicted weaker profits in the short term, sending the shares down on Thursday. The company reported adjusted earnings of $1.62 per share, down 10% from the same period last year, but up from consensus estimates of $1.54 per share. Merck said revenue rose 2% to $13.83 billion, against forecasts of $13.67 billion.

Separately, Eli Lilly ( LLY ) reported stronger-than-expected fourth-quarter results on Thursday, lifting its full-year profit forecasts. Eli Lilly said adjusted earnings for the quarter came in at $2.09 per share, versus the consensus estimate of $1.78. Revenue fell 8.75% from last year to $7.3 billion, narrowly missing expectations for $7.33 billion.

Overall, the fourth quarter earnings season appears to be improving, noted Andrew Tyler, US Market Intelligence team at JP Morgan. But he said the question remains: “Will investors chase the soft landing story and the current rally?”

The technical results come as layoffs have become evident in recent months in the sector, as small and large companies cut staff to account for their slowing growth following record profits during the pandemic. The total number of tech jobs cut has been 41,829 over the past month, the highest across industries, according to a report by Challenger, Gray & Christmas Inc.

Elsewhere in the markets, Carvana ( CVNA ) shares surged 30% Thursday morning, bringing the online used car seller’s year-to-date gain to nearly 200%.

Meanwhile, overseas, the Bank of England followed the US Fed by raising interest rates by 0.5% to 4%, the highest level in 14 years. The increase from 3.5% was highly expected by economists. It is the bank’s 10th consecutive rate hike as it continues to try to tame record high inflation.

The European Central Bank – the central bank for the 20 countries that share the euro – raised interest rates by another half a percentage point to 2.5%, in line with market expectations. The next rate hike will be of the same size, the ECB said.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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